Cash Machine Trading Cheap – Stride Stock Set to Run?

We think Stride (LRN) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market.

What Is Happening With LRN

LRN stock is available at a significant discount to its 3-month, 1-year, and 2-year highs. This can be attributed to initial operational hurdles with new platform implementations and lower Adult Learning segment revenue, with expected flat revenue per enrollment.

Here is what’s going well for the company: Stride recorded robust total enrollment growth, led by Career Learning. Management anticipates positive cash flow for upcoming quarters, supported by a low 0.39 debt-to-equity ratio. The valuation discount likely reflects broader sector sentiment and recent analyst estimate revisions.

LRN Has Strong Fundamentals

• Cash Yield: Stride offers an impressive cash flow yield of 10.1%.
• Growing: Revenue growth of 17.3% over the last twelve months means that the cash pile is going to grow.
• Valuation Discount: LRN stock is currently trading at 53% below its 3-month high, 58% below its 1-year high, and 58% below its 2-year high.

Below is a quick comparison of LRN fundamentals with S&P medians.

*LTM: Last Twelve Months

But What About The Risk Involved?

While LRN stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. LRN wasn’t immune to market turmoil either. It fell about 58% during the Global Financial Crisis and 59% in the Covid sell-off. The 2018 correction wiped out nearly 49%, while the inflation shock last year caused a smaller dip, around 33%. Even with solid fundamentals, LRN shows that deep pullbacks can happen when the market turns. Just a reminder that risk is always there, no matter how strong the story looks. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read LRN Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

If you want to see more details, read Buy or Sell LRN Stock.

Other Stocks Like LRN

Not ready to act on LRN? You could consider these alternatives:

1. Oracle (ORCL)
2. Coinbase Global (COIN)
3. Roblox (RBLX)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Positive revenue growth
3. High free cash flow yield
4. Meaningful discount to 3M, 1Y, and 2Y highs

A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:

• Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
• Win rate (percentage of picks returning positive) of >70% for both 6-month and 12-month periods

Portfolios Over Individual Stock Picks

Stocks can jump or crash but long term success comes from staying invested. The right portfolio helps you ride gains and cushion single stock drops

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.